Human Resource Selection 9th Edition by Marianne Jennings

Exercise 14

Rollo Norton II, a.k.a. Rick, a financial planner, worked diligently for a number of years to try to keep a San Diego condo project afloat during a real estate downturn. He has confessed to forging signatures, faking loan applications, kiting checks intended for deposit in escrow accounts, and using credit of buyers to borrow money to keep his project going. He and two associates entered guilty pleas and are cooperating with federal authorities in their ongoing investigation of the project.
Fidelity National Financial, which is the largest title insurance company in the United States, was the title insurer for most of the buyers in the project. The project began to unwind in 2006 when several buyer victims filed suit and the architect for the project entered a guilty plea to fraud. However, Fidelity did not disclose the suits, suits that increased from 2006 until October 2009 when the fraud issues emerged. There is no mention in any of the company's 8-K, 10-Q, or 10-K filings about the developments in the project, the litigation, or the guilty pleas.
When Fidelity shareholders filed suit against the company for violations of 10b, company expert witnesses maintained that disclosure when there is uncertainty can harm the company's share price and result in unnecessary losses.
Should there have been disclosure? Of what, how much, and when?